Here is what I advise my tax clients. And it is the policy I follow for my own records.
IRS has three Statutes of Limitations for audits of tax returns. Note that none of them start until you actually file your tax return.
The first one, which applies to most people, is three years from the date of filing. Note if you file timely but before April 15, you are considered to have filed on April 15.
The second has to do with an Amended Return. In this situation it is the later of the normal three years from date of filing or two years from date of the Amended Return.
The third has to do with Civil Fraud, which is defined as "the non-reporting of income equal to at least 25% of what was reported" and is six years from the date of filing.
After preparing my tax return, I will take all documents for the year and put them in a large envelope (or two) and put them away until the Statute expires, at which time I will destroy them.
Anything related to an asset has special rules. This would be a title to a house or car, purchase information related to investments or anything that is related to depreciation. All these records have to be held until the asset is disposed of. When the asset is disposed of, all records related to the acquisition and disposition (purchase and sale) of the asset then become records for the tax year of disposition and go in the envelope with everything else.
The only exception is I keep a copy of each actual tax return. And my file goes back into the early 1970's but is only about five inches thick. I keep these for historical and comparison purposes only even though I don't have to.
Mike (CPA Retired but still with tax clients)
How long should we keep:
